Closing summary
Time for a recap….
British house prices have fallen at the fastest annual pace since 2009, mortgage lender Halifax said this morning.
With increases in interest rates cooling the market, prices fell by £14,000 over the past 12 months to £279,569, a drop of 4.6% – the biggest annual decline since 2009.
The average house price fell 1.9% in August alone, the biggest monthly fall since November 2022.
Halifax predicted that prices would continue to fall, with prices down sharpest in the South East of England in the last year.
The pound has continued to weaken today, as investors anticipate the Bank of England is close to ending its interest rate increases. Sterling dropped to $1.245, the lowest since June.
Growth in the eurozone was weaker than thought in the last quarter. Eurozone GDP rose by just 0.1% in April-June, down from a previous estimate of 0.3%, prompting fears of a recession later this year.
In other news….
Woking council has laid out a drastic package of cuts to local services after it in effect declared itself bankrupt earlier this summer, revealing a £1.2bn deficit racked up from a risky investment spree overseen by its former Tory administration.
The competition regulator is taking aim at the UK’s £2bn veterinary industry, amid fears that a surge in chain-owned surgeries may be leaving pet owners with dwindling choice and “eye-watering” bills.
British American Tobacco has reached an agreement to sell its Russian and Belarusian businesses to a group led by its Moscow management team
Workers should come into the office at least three days a week – and not just Tuesday to Thursday – to ensure clients are properly served throughout the week, according to the head of the world’s biggest insurance market.
And the Ryanair chief executive, Michael O’Leary, got a rude welcome in Brussels when he received two cream pies to the face while standing next to a cardboard cutout of the EU’s Ursula von der Leyen.
Recession fears after eurozone growth downgrade
This morning’s downgrade to eurozone growth in the last quarter, from 0.3% to just 0.1%, has raised fears that Europe could slide into recession later this year.
Capital Economics say:
The downward revision to the euro-zone’s second-quarter GDP data means the economy is now thought to have essentially flat-lined since the fourth quarter of last year.
With business surveys having turned down sharply in July and August, construction and industry struggling and the labour market easing, we suspect that the euro-zone will slip into recession in the second half of the year.
A new UK mortgage lender is launching home loans that allow people to fix their rate for up to 30 years. It may also let them borrow more money than standard deals.
Perenna claimed that by giving people certainty over what they pay for up to three decades, its deals would free borrowers from the interest rate turmoil that has caused many people to be hit with dramatically highermortgage costs this year.
The startup bank, which has just secured full approval from the UK’s main financial regulators, also said it was not ruling out offering one fixed rate for up to 40 or 50 years in future.
British American Tobacco says it will sell its last cigarette in Russia within a month, my colleague Rob Davies reports.
BAT has, finally, reached an agreement to sell its Russian and Belarusian businesses to a group led by its Moscow management team.
This will ending BAT’s presence in the world’s fourth-largest tobacco market a year and a half after it first pledged to do so in response to the invasion of Ukraine.
Woking to cut funding to sports pitches, arts, playgrounds and toilets to avert bankruptcy
Woking council has laid out a drastic package of cuts to local services after its effective bankruptcy earlier this summer, my colleague Richard Partington reports.
The hefty cuts come after Woking revealed a £1.2bn deficit racked up from a risky investment spree overseen by its former Tory administration.
Plans include scrapping funding for all of the town’s sports pavilions and toilets, the closure of a swimming pool, cutting resources for parks, the arts, and ending council backing for some community centres, annual concerts, and its involvement in youth sporting events.
The troubled Surrey local authority also proposed scrapping millions of pounds in support for leisure centres, playgrounds and community schemes for young, old and vulnerable residents in an attempt to balance the books. It will launch a consultation on the proposals next month.
In a grim document setting out a wide-ranging austerity programme, it also revealed plans to remove funding for choir and dance classes for residents with Parkinson’s disease, as well as grants for a charity helping domestic abuse survivors, and a community transport scheme.
“It’s horrendous. I think residents were unaware really quite how bad it would be,” said John Bond, a former independent councillor in the authority.
Bond says:
“Who will want to come and live in Woking now? It’s going to affect everything, with the vulnerable suffering most.
“There is so much money owing, it’s going to go on for 10 or 20 years. The amounts are mind-boggling.”
Here’s the full story:
This morning’s data (see 9.38am) shown that companies anticipate slower price rises in the year ahead is “good news for the Bank of England,” says James Smith, developed markets economist at ING.
It provides further ammunition for the Bank of England doves, who are unhappy about further rate increases, Smith says. And could mean that the BoE only raises interest rates one more time in the current cycle, later this month.
Smith says:
The bottom line is that the Bank is likely to hike rates by 25 basis points again in two week’s time, but our base case is that this is the last hike in this tightening cycle. Governor Andrew Bailey’s indication that we’re near the top of the tightening cycle came wrapped with several caveats. But it fits into a broader communication exercise from the Bank that appears to be laying the ground for a pause.
Chief Economist Huw Pill’s reference to a “table mountain” profile for rates gave a further indication that the Bank is now more concerned about how long rates stay elevated rather than how high they peak. References to policy now being “restrictive” in the August policy statement pointed in this direction too.
A November hike is possible, but assuming we’re right about the direction of the dataflow and on the basis of recent BoE comments, we think a pause is still more likely at that meeting.
The Bank of England's own survey of businesses is helping to make the case for one final rate hike in two weeks' time, then a pause in November.https://t.co/EI0plO0x1q
— ING Economics (@ING_Economics) September 7, 2023
On Wall Street, shares in Apple have dropped by 3.5% at the start of trading, following reports that China has banned officials at central government agencies from using or bringing iPhones and other foreign-branded devices into the office.
That follows a 3.6% drop on Wednesday, when the Wall Street Journal reported that Chinese officials had been given the instructions by their superiors in workplace chat groups or meetings.
Reuters reported this morning that China has in recent weeks widened existing curbs on the use of iPhones by state employees, telling staff at some central government agencies to stop using their Apple mobiles at work.
Here’s Mike Scott, chief analyst at national estate agency Yopa, on this morning’s house price report from Halifax:
“The Halifax House Price Index for August shows a 1.9% monthly fall in the price of the average house, the largest fall that the Halifax has recorded since November last year. This has caused an abrupt jump in the annual rate of decrease, from 2.5% to 4.6%, which brings it closer to the figures reported by the Nationwide last week — earlier in the year, the Halifax was reporting significantly smaller annual falls than the Nationwide.
Mortgage interest rates now seem to have passed their peak, and Yopa expects that modest house price growth will resume next year, driven by wage increases, low unemployment and the shortage of housing. However, we do not expect a return to the kind of price increases that we saw between 2020 and 2022.”.
Announcement 🔊 Our monthly House Price Index is out 🏠 showing house prices have fallen by 1.9% or by an average of £5,475 in August.
— Halifax (@HalifaxBank) September 7, 2023
For more information and support on mortgages click here: https://t.co/VQc9TEKQM8 pic.twitter.com/O18YGeZoov
The sharp annual drop in UK house prices last month may make the Bank of England warier of raising interest rates higher, suggests Samer Hasn, market analyst at XS.com.
I believe that this sharp decline in house prices will give more warning signs about the risk of further interest rate hikes, which have already hurt the real estate market.
While we had seen a string of negative data on the UK economy, we are still seeing a contraction in manufacturing and service activities, albeit slower than expected, in light of the August PMI figures. This is despite the growth in construction activities with a stronger than expected construction PMI reading for August.
The money markets are currently indicating there is a 72% chance that the Bank raises interest rates later this month from 5.25% to 5.5%, down from around 85% earlier this week.
Smurfit Kappa in talks to merge and move listing to US
The City faces losing another blue chip company soon, after packaging firm Smurfit Kappa announced it is in advanced merger talks with US rival WestRock.
The two companies could combine to create a new global leader in sustainable packaging, called Smurfit WestRock, with over 100,000 employees.
It would be incorporated and domiciled in Ireland with global headquarters in Dublin, and North and South American operations headquartered in Atlanta, Georgia.
Smurfit Kappa is one of Ireland’s largest companies, and a member of London’s FTSE 100 index as well as being listed on Euronext Dublin. But those listings would be cancelled if a deal is agreed, with Smurfit WestRock’s ordinary shares listed on the New York Stock Exchange (NYSE) instead.
Smurfit Kappa in talks with WestRock to create paper and packaging giant https://t.co/h6QDRIrxE6 pic.twitter.com/2xcf2AFkgZ
— Reuters U.S. News (@ReutersUS) September 7, 2023
US jobless claims fall
Just in: Fewer Americans filed new claims for jobless support last week.
There were 216,000 fresh initial claims for unemployment benefits a drop of 13,000 on the previous week – and a low level in historic terms, despite the pressure from higher US interest rates.
It pulled the 4-week moving average down by 8,500, to 229,250.
JUST IN: United states Initial Jobless Claims 216K Expected: 234K Last: 229K
— Trader’s Dashboard (@Traderdashbored) September 7, 2023
U.S INITIAL JOBLESS CLAIMS ACTUAL: 216K BELOW EXPECTATIONS OF 234K (PREVIOUS 228K)
— Evan (@StockMKTNewz) September 7, 2023
Ryanair boss Michael O’Leary hit by pie to the face
The chief executive of Ryanair, Michael O’Leary, has had a cream pie pushed in his face outside the headquarters of the European Union today.
O’Leary was in Brussels to hold a press conference, where he was expected to complain about delays and cancellations to overflights over the summer due to French air control strikes.
Ireland’s Business Post reports that the pie was delivered by environmental activists in Brussels, adding:
Footage of the incident showed one of the women shouting: “Welcome en Belgium”, before adding: “Stop the pollution of the fucking planes.”
O’Leary, standing next to a cardboard cutout of Ursula von der Leyen, the president of the European Commission, quickly removed his jacket and sarcastically called “well done” to his retreating assailants.
According to French media, he then added: ”I have never had such a warm welcome. Unfortunately they were environmentalists and the cream was artificial. I invite passengers to come to Ireland where the cream is better.”
Ryanair boss Michael O’Leary takes pie to the face from environmental activists https://t.co/63e1c3amcY
— Business Post (@businessposthq) September 7, 2023
French word of the day: "entartré". Ryanair boss Michael O’Leary gets greeted by climate activists in Brussels with a pie in the face. "Arrêtez la pollution avec vos putain d'avions." https://t.co/Thz6KHRNHg
— Matthew Fraser 🇪🇺 (@frasermatthew) September 7, 2023
Updated
Germany’s industrial gloom has deepened today, after factories reported that production fell for the third consecutive month in July.
German factory output fell by 0.8% in July month-on-month, a larger fall than expected.
German industrial output fell again in July.
— Tracy (𝒞𝒽𝒾 ) (@chigrl) September 7, 2023
Production declined 0.8% from June, led by capital and consumer goods, according to the statistics office in Wiesbaden. The median prediction in a Bloomberg survey of economists was for a drop of 0.4%. The index for output showed the… pic.twitter.com/pCTu9TQBzH
Moody’s Analytics’ senior economist David Muir, fears the slump will pull Germany’s economy into a contraction this quarter.
“Germany’s industrial sector remains mired in contraction, driven by weak new demand from both home and abroad, lower backlogs of work, and destocking.
We expect the fall in manufacturing output will cause GDP to contract in the third quarter. And with new factory orders continuing to trend lower, it’s unlikely that the manufacturing sector will turn the corner by year-end.
But firms are holding onto staff, suggesting they seem the potential for a pickup further ahead, when lower inflation will allow real incomes to strengthen and the global economy should be on a firmer footing”.
Q&A: Why are house prices falling?
PA Media have published a handy Q&A about the state of the UK housing market:
What do the latest housing market figures show?
According to Halifax, year-on-year house price falls are now widespread across the UK. Across the UK as a whole, the average property value is around £14,000 less than it was a year earlier, according to the bank.
Halifax’s findings follow similar findings from Nationwide Building Society last week. Nationwide also said that, according to its index, house prices are on the sharpest annual decline it has seen in 14 years.
What is behind the price falls?
While there have recently been signs that some mortgage rates are settling down, rates are still significantly higher than they would have been a couple of years ago, making the cost of buying a home more expensive.
This means it has become more of a “buyers’ market”, with some sellers needing to adjust their expectations about the price they are likely to achieve.
Uncertainty about the wider economy may also be playing a part, with some buyers preferring to wait and see what happens.
What are the factors supporting house prices?
Supply shortages will help to keep house prices up in popular areas, while wage growth has also been strong, bolstering buyers’ incomes.
Is the picture the same across the UK?
According to Halifax, while house prices are broadly falling across the UK, they are holding up better in some places than others.
In Scotland, prices are down by 0.6% compared with a year ago, while in south-east England they have plunged by 5.0%. With house prices in southern England often being higher than elsewhere in the UK, these homeowners often have to find particularly big deposits and pay large cash amounts each month towards their mortgage. They may have been particularly affected by the sharp rise in mortgage rates.
Is my house now worth less than what I paid for it?
That will depend on when you bought it and what is happening in your local housing market.
It is also worth bearing in mind that, although house prices have been falling recently, Halifax says that the average UK house price remains around £40,000 – or 17% – above pre-pandemic levels.
Anyone with concerns about negative equity – when the amount they owe for their house is more than the property is worth – should speak to their lender.
Lenders are offering a range of support for those struggling with their mortgage payments, such as temporary switches to interest-only payments and extensions on mortgage terms.
Could the housing market see more property chains breaking?
According to website and news agency Newspage, some experts believe gazundering could be a growing threat.
Gazundering happens when someone reduces their offer, having previously agreed a higher price.
Lewis Shaw, founder of Mansfield-based Shaw Financial Services told Newspage: “At the eleventh hour, buyers are trying to pull a fast one and that’s crippling chains.”
David White, of Chelmsford-based mortgage broker Simply Lending, told Newspage that mortgage rate volatility is also hitting chains hard, adding: “Two primary causes of chains breaking are the down-valuing of properties and fluctuating mortgage rates.”
What about renters?
House prices may be falling but rents are still generally going up, according to recent reports.
The higher mortgage rates being paid by landlords will filter through to rental prices. There have also been signs that the supply of rental homes is being squeezed, which could perhaps be a sign of some landlords selling up due to the squeeze on any profits they are making.
What is next for the housing market?
Much of the hike in mortgage costs is still filtering through to households, as many people are on fixed-rate deals and are yet to re-mortgage on higher rates. Halifax suggests this lag could be a reason why house prices have been more resilient so far this year than expected.
Going forward, we may now be seeing a greater impact from higher mortgage costs flowing through to house prices, the bank suggests.
Further downward pressure on house prices is expected, going into next year, as people continue to adjust to higher mortgage rates.
UK house prices: the key charts
China’s yuan hits 16-year low after trade weakens
China’s currency has fallen to its lowest point against the dollar in 16 years, after Beijing reported its fourth drop in exports in a row.
The yuan weakened to 7.3273 to the dollar, its lowest close since December 2007, during the financial crisis.
The drop came after China reported another monthly decline in imports and exports for last month.
Exports in U.S. dollar terms fell by 8.8% in August from a year ago, while imports declined by 7.3%. These falls indicate that weaker overseas demand and subdued domestic consumer spending are hitting China’s economy.
Another reason to be on the side of inflation and economic pessimism, China and CNY.
— Jeffrey P. Snider (@JeffSnider_AIP) September 7, 2023
After fighting the Euro$ for more than two months, the PBOC has had to give up. Yuan finally fell below its last year low and now sits at the worst exchange value in 15 and a half years. pic.twitter.com/2ZS8dMAneh
Kyle Rodda, senior financial market analyst at capital.com, says:
On the data front, China’s trade figures were slightly better than feared, with both imports and exports in US Dollar terms falling by less than expected.
The US dollar-denominated trade balance fell by more than forecast, however, posing further pressures to a weakening Yuan.
Updated
Falling UK house prices is reportedly leading some buyers to cut their offers just before exchanging contracts, a practice known as ‘gazundering’.
Lewis Shaw, founder of Mansfield-based Shaw Financial Services, reports that gazundering is “proving increasingly common at the moment”, adding:
“At the eleventh hour, buyers are trying to pull a fast one and that’s crippling chains. On the whole, chains are taking too long, all parties are getting hacked off, and some are calling it a day.”
Kundan Bhaduri, director of London-based property developer and portfolio landlord, The Kushman Group, also reports that some property chains are fraying:
“Gazundering is on the up, as are failed surveys due to down-valuations. Archaic conveyancing taking forever doesn’t help with the complexity involved in long chains, either. The fragile links in property purchase transactions are increasingly snapping under the weight of all these factors.”
The German economy will contract by 0.4% this year, the Ifo Institute has predicted today, matching its previous forecasts published in June.
Ifo’s head of forecasts Timo Wollmershaeuser says:
“Contrary to previous expectations, the recovery is likely to fail to materialise in the second half of the year.”
Eurozone growth revised down
Newsflash: growth across the eurozone has been revised lower.
Statistics body Eurostat says eurozone GDP rose by just 0.1% in April-June, down from a previous estimate of 0.3% growth.
That’s slower than the US, which grew by 0.5% in April-June, and the UK which expanded by 0.2%.
Eurostst reports that Lithuania (+2.9%) recorded the highest increase of GDP compared to the previous quarter, followed by Slovenia (+1.4%) and Greece (+1.3%).
The highest decreases were observed in Poland (-2.2%), Sweden (-0.8%) and Austria (-0.7%).
Germany stagnated in the quarter, while France’s GDP rose by 0.5%.
Euro area #GDP +0.1% in Q2 2023, +0.5% compared with Q2 2022 https://t.co/n24kQF4rK8 pic.twitter.com/lXNN5qUyBW
— EU_Eurostat (@EU_Eurostat) September 7, 2023
UK firms expect slower price rises
UK businesses expect to raise their prices at a slower rate over the next 12 months, new data from the Bank of England shows.
The BoE’s latest Decision Maker Panel, just released, shows that businesses expect output price inflation to fall over the next year.
Year-ahead output price inflation was expected to be 4.9% in the three months to August, down 0.5 percentage points compared to the three months to July.
The survey of Chief Financial Officers also found that CPI inflation is forecast to be 4.8% in a year’s time, down from the 5.4% expected a month ago.
Firms expect to raise pay by 5%, the same as last month, which is rather lower than realised wage growth, which was at 6.9% in both the single month data and the three months to August, the BoE adds.
Monthly Decision Maker Panel data - August 2023
— Markets Today (@marketsday) September 7, 2023
The Decision Maker Panel (#DMP) is a survey of Chief Financial Officers from small, medium and large #UK businesses. We use it to monitor developments in the economy and to track businesses’ views.#BOE pic.twitter.com/ofixkNfEx3
Updated
Full story: Biggest drop in UK house prices in 14 years
UK house prices suffered their sharpest annual drop in 14 years, as the seasonal summer slump and high mortgage costs dragged on sales.
Data released by Halifax, Britain’s biggest mortgage lender, said on Thursday that prices fell by 4.6% in August, marking the biggest year-on-year decrease since 2009.
It means that the price tag of the typical UK home has dropped by about £14,000 over the past 12 months to about £279,569. That is the lowest level since early 2022, but still leaves average prices £40,000 higher than before the pandemic, when lockdowns fuelled demand for larger homes in a ‘“race for space”.
The latest annual decline, however, suggests homeowners continue to be deterred by high interest rates, which have been hiked by policymakers in an attempt to combat inflation but fuelled higher mortgage costs. More here.
📉 Property prices dropped by -4.6% on an annual basis according to @HalifaxBank, from -2.5% in July, though prices were at a record peak last summer
— Henry Pryor (@HenryPryor) September 7, 2023
A typical UK home now costs £279,569, down by around £14,000 over the last year & back to the level seen in early 2022. pic.twitter.com/31ZSGUrhWN
T. Rowe Price: Prices will keep falling
Tomasz Wieladek, chief European economist at T. Rowe Price, has predicted that UK house prices will continue to fall sharply in the coming months.
Wieladek believes the worst is yet to come for the housing market:
UK house prices will continue to fall at a sharp rate, with the point of greatest pressure for the market still ahead of us. A peak-to-trough decline of 15% is the most likely outcome in my view, while a 20% drop is possible in a more adverse scenario.
House prices will continue to fall at a rapid rate well into next year for a number of reasons. Clearly, the cost of a mortgage has increased sharply with the Bank of England’s policy rate. Although mortgage rates have come down a little from the peaks, the mortgage payment increase for anyone refinancing today compared to two years ago will be huge. Among all the other pressures from higher inflation, this will put significant pressure on households.
Rising unemployment is likely to lead to more people defaulting on their loans, Wieladek fears:
Because the unemployment rate will keep rising, mortgage defaults will likely rise, which is when the housing market will be under the most pressure in this cycle.
This moment is still ahead, not behind, us. With wage and price inflation still very high, the Bank of England will not come to the rescue any time soon, as it needs greater slack in the labour market to squeeze wage inflation out of the economy. Instead, rates are more likely to keep rising given the latest inflation data.
The latest mortage rates data has just arrived, from Moneyfacts, showing a small drop in the cost of five-year loans today.
They say:
The average 2-year fixed residential mortgage rate today is 6.67%. This is unchanged from the previous working day.
The average 5-year fixed residential mortgage rate today is 6.16%. This is down from an average rate of 6.17% on the previous working day.
Today’s data from Halifax paints another worrying picture for homeowners looking to sell, as some prospective first-time buyers shun the market, says Karen Noye, mortgage expert at Quilter.
But if interest rates do stabilise, that could encourage buyers back.
Nye explains:
The current scenario, where the rates might remain consistent, could act as a magnet, drawing first-time buyers back into the housing fold.
First-time buyers are often considered the lifeblood of a healthy housing market. Their activity stimulates demand, ensuring a steady flow of transactions from the bottom up. The recent slump in house prices, as reported by Halifax, can be attributed to the conspicuous absence of these buyers. With more predictability in interest rates, we might see a resurgence in demand, potentially leading to a soft landing for house prices, rather than a sharp decline.
Pound at three-month low below $1.25
The pound has slipped to a new three-month low this morning.
Traders are digesting Bank of England governor Andrew Bailey’s prediction yesterday that UK interest rates are near their peak.
This has pushed sterling to $1.247 this morning.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, says Bailey’s comments are “a glimmer of light for UK borrowers”, adding:
Comments from Andrew Bailey have sent the pound sharply lower, below $1.25 to a level not seen since June. Speaking to MPs, he said the UK is much nearer now to the top of the cycle. So, not only is the Bank of England forecast to go softer on rate hikes going forward, with this month’s expected increase now potentially the last, the bets are that the Fed might step back on the pedal after a brief pause.
This marks a considerable reversal of expectations compared to just a few weeks ago, as data has filtered through showing a sharper weakening of business activity in the UK, while in the US the services sector is still pumping.
Updated
Competition authorities examine if pet owners are being overcharged at the vet
In the City, shares in Pets at Home have dropped by 10% after competition authorities launched a probe into veterinary services.
The Competition and Markets Authority (CMA) is concerned that the cost of vet services has risen faster than the rate of inflation, and that pet owners may not be given the information they need about prices and treatment options.
The CMA is keen to hear more about pet owners’ and vet practitioners’ experiences of:
Pricing of services, including whether pet owners were aware of how much a treatment would cost, and how they pay for it (whether they pay themselves or via insurance)
How prescriptions and medication for pets are arranged and sold
Choosing a vet surgery and whether people are aware that their vet may be part of a larger chain which might also own other surgeries in the area
Using out-of-hours and emergency vet services where options might be limited
Sarah Cardell, chief executive of the CMA, says it’s very important that people get clear information and pricing to help them make the right choices.
Cardell adds:
There has been a lot of consolidation in the vet industry in recent years, so now is the right time to take a look at how the market is working.
When a pet is unwell, they often need urgent treatment, which means that pet owners may not shop around for the best deal, like they do with other services. This means they may not have the relevant information to make informed decisions at what can be a distressing time. We want to hear from pet owners and people who work in the sector about their experiences.
Are pet owners being overcharged at the vet?
— BBC Radio 4 Today (@BBCr4today) September 7, 2023
George Lusty from the Competitions and Markets Authority tells #R4Today it’s launched a review ‘to make sure people can predict' the cost of vet services, as they’re rising faster than other bills.
Fourteen consecutive rate rises from the Bank of England are weighing on mortgage affordability, pushing down house prices, points out Victoria Scholar, head of investment at interactive investor.
This has prompted sellers to negatively recalibrate their asking prices as property demand softens. Halifax anticipates that this trend will continue with further weakness coming through this year into next. While falling house prices can help first-time buyers get onto the housing market, many individuals and families are facing a perfect storm, stuck with the dilemma of deciding between extortionate rental costs or hefty monthly mortgage repayments.
Despite this, both Nationwide and Halifax have taken a relatively optimistic stance on the market’s decline. Nationwide anticipates a ‘soft landing’ rather than a housing crash and Halifax said that house prices ‘have proven more resilient than expected so far this year.’
🇬🇧 𝗨.𝗞. 𝗛𝗢𝗨𝗦𝗘 𝗣𝗥𝗜𝗖𝗘𝗦 𝗗𝗥𝗢𝗣 𝗠𝗢𝗥𝗘 𝗧𝗛𝗔𝗡 𝗘𝗫𝗣𝗘𝗖𝗧𝗘𝗗
— PiQ (@PriapusIQ) September 7, 2023
Halifax House Price Index (MoM):
Actual: -1.9% 🔴
Expected: -0.3%
Previous: -0.4%
(YoY):
Actual: -4.6% 🔴
Expected: -3.5%
Previous: -2.5% pic.twitter.com/HdNAHVhCzQ
Looking back through the data, the 4.6% drop in prices in August is the biggest annual decline since October 2009.
2009 was a rough year for the housing market, following the collapse of Lehman Brothers the previous autumn.
House price deflation peaked in spring 2009, with prices down 17.7% per year in both February and April 2009.
Instant Info – Halifax UK House Price Index pic.twitter.com/JDa3UJFCcZ
— BuiltPlace (@BuiltPlace) September 7, 2023
Estate agents report that potential buyers are negotiating house prices down.
Nathan Emerson, CEO of Propertymark, reports that more houses are selling below their asking price:
“House prices are thankfully adjusting to more sensible levels alongside increases to people’s earnings and the number of properties selling below asking price is increasing, offering homebuyers the opportunity to negotiate. These factors are all playing a part in increasing homebuyers’ affordability and softening the blow of rising interest rates.
“However, despite how this may look on the face of things, sellers are rightly still motivated to sell as they continue to make a healthy gain on their property price.”
Matt Thompson, head of sales at Chestertons, says:
“With higher interest rates impacting on UK households, property buyers are adopting a more strategic and flexible property search by adjusting their budget or widening their search criteria to find a suitable home.
Although some buyers took a break during the August holidays, others utilised last month to enter price negotiations or seal the deal by signing contracts.”
Avg house prices melt under the Aug heat, dropping -1.9% in a month & -4.6% annually, making the typical home now worth £279,569. Peeling back prices by £14,000 on last year but still up £40,000 on pre-pandemic levels @HalifaxBank pic.twitter.com/wQVckQi9ii
— Emma Fildes (@emmafildes) September 7, 2023
Jeremy Leaf, north London estate agent, warns that sellers who don’t accept price reductions may not get a deal:
“Prices continue to soften although they are supported to a degree by the shortage of stock and fewer but more serious buyers.
With so many rate rises, affordability is a concern, especially for those on tighter budgets, often buying smaller properties so the market remains price sensitive.
The penny has dropped for the majority of sellers who are recognising that they may not achieve what they originally anticipated. As many sellers are also buyers, they realise that although they may have to accept less than they initially wanted for their property, they will also pay less for their next home which is significant as many will be trading up.
Those sellers who refuse to recognise that prices are softening will remain on the market and may end up having to accept a lower price in order to make their move.’”
Prices fall fastest in South East, slowest in Scotland
House prices have fallen all UK nations and the nine English regions over the last year, Halifax’s house price index shows.
But the north of the country has proved more resilient than the south.
Prices are falling fastest in the South East of England, where a 5% fall in the last year has pulled the average house price down to £379,565.
Halifax says:
Buyers faced with the need to find larger deposits and fund bigger monthly repayments means the South East is experiencing the biggest drop.
London remains the most expensive place in the UK to purchase a home, with an average property price of £529,814. However with prices down by -4.1% over the last year, it has seen the biggest fall of any region in cash terms (-£22,777).
Prices have fallen by 4.7% in the last year in Wales, which had boomed in the pandemic race-for-space, with the average house price now £212,967.
In Northern Ireland property prices have fallen by -1.5% annually, to an average of £182,700.
But prices fell slowest in Scotland, where they are down just -0.6% over the last year, to an average of £201,932.
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Halifax: We expect further downward pressure on property prices
Looking ahead, Halifax predicts there will be “further downward pressure on property prices” through to the end of this year and into 2024.
Kim Kinnaird, director of Halifax Mortgages, points out, though, that house price affordability measures have improved.
While any drop won’t be welcomed by current homeowners, it’s important to remember that prices remain some £40,000 (+17%) above pre-pandemic levels.
It may also come as some relief to those looking to get onto the property ladder. Income growth has remained strong over recent months, which has seen the house price to income ratio for first-time buyers fall from a peak of 5.8 in June last year to now 5.1. This is the most affordable level since June 2020, and will be partially offsetting the impact of higher mortgage costs.
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Introduction: UK house prices drop 4.6% in year to August
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK house prices have fallen at their fastest rate since the aftermath of the financial crisis, new data confirms this morning, as high interest rates cool the property sector.
Halifax, the UK’s largest lender, has reported that the average property price fell by 4.6% on an annual basis in August, down from the record highs seen last summer. That’s the largest year-on-year decrease in house prices since 2009.
The price of a typical UK home dropped to £279,569, down by around £14,000 over the last year, back to the level seen in early 2022. It leaves average prices around £40,000 above pre-pandemic levels.
That’s a bigger fall than expected, with economists having predicted a 3.45% annual fall.
On a monthly basis, the average house price fell by -1.9% in August, the largest monthly fall since November 2022.
Halifax reports that Southern England and Wales are seeing most downward pressure on property prices, with Scotland showing greater resilience.
Rival lender Nationwide reported last week that UK house prices fell 5.3% in August, the fastest annual drop in 14 years.
But there are signs that UK borrowing costs could be close to their peak. Yesterday, Bank of England governor Andrew Bailey said interest rates are probably “near the top of the cycle”, and predicted there willl be a further “marked” drop in inflation this year.
But for now, higher rates are cooling the markets.
Kim Kinnaird, director at Halifax Mortgages, says:
“It’s fair to say that house prices have proven more resilient than expected so far this year, despite higher interest rates weighing on buyer demand. However, there is always a lag-effect where rate increases are concerned, and we may now be seeing a greater impact from higher mortgage costs flowing through to house prices.
Increased volatility month-to-month is also to be expected when activity levels are lower, though overall the pace of decline remains in line with our outlook for the year as a whole.
Kinnaird adds that some prospective buyers deferred their transactions in the hope of some stability in the markets, and greater clarity on the future direction of rates in the coming months.
The market will continue to rebalance until it finds an equilibrium where buyers are comfortable with mortgage costs in a higher range than seen over the previous 15 years.
The agenda
7am BST: Halifax house price index for August
7am BST: German industrial production data for July
10am BST: Eurozone Q2 GDP (second estimate)
1.30pm BST: US initial jobless claims
Update: The headline of this article was amended on 7 September 2023 to make clear that the 4.6% drop in house prices was on an annual basis.
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